Johannesburg, 27 March 2019 — Global Credit Ratings has today affirmed the national scale ratings assigned to Oryx Properties Limited of BBB+(NA) and A2(NA) in the long term and short term respectively, with a Rating Watch accorded. The ratings are valid until 30 May 2019.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit ratings to Oryx Properties Limited (“Oryx”) based on the following key criteria:
The Rating Watch relates to the rise in gearing metrics and weak liquidity assessment at 1H FY19. Given the ongoing investment spend, Oryx’s net LTV rose to 44.5% at 1H FY19, from 26.7% at FY18, exceeding the fund’s comfort level of 40%. Similarly, net interest cover decreased to 2.2x (FY18: 2.5x). Both credit metrics remain within Oryx’s debt convents, but at current levels GCR does not consider there to be sufficient available liquidity, with only NAD55m unutilised at 1H FY19.
To remedy the high gearing, Oryx is undertaking a NAD300m rights issue, which would see the LTV ratio decrease to around 35%, and although gearing will again increase as the funding is used for developments and acquisitions, the LTV is not projected to rise above 40% over the short term. As the rights issue proceeds will initially be deposited against the revolving cash flow facilities, it is also critical to bolstering liquidity and will enhance Oryx’s ability to meet capex and debt redemption obligations.
As the rights issue is not underwritten, there remains execution risk. Successfully completing the rights issue, to provide additional funding, will support the current rating. Conversely, negative rating action could arise if insufficient funds are raised under the rights issue, such that credit protection metrics and liquidity remain weak.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (February 2015)||Last rating (February 2018)|
|Long term: BBB+(NA); Short term: A2(NA)||Long term: BBB+(NA); Short term: A2(NA)|
|Outlook: Stable||Outlook: Stable|
|Sector Head: Corporate and Public Sector Ratings|
|Senior Analyst: Corporate Ratings|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018
Global Criteria for Rating Property Funds and Commercial Real Estate Companies, updated February 2018
Oryx rating reports, 2015-18
RATING LIMITATIONS AND DISCLAIMERS
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GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S Corporates GLOSSARY
|Debt||An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.|
|Diversification||Spreading risk by constructing a portfolio that contains different investments, whose returns are relatively uncorrelated. The term also refers to companies which move into markets or products that bear little relation to ones they already operate in.|
|Downgrade||The assignment of a lower credit rating to a corporate or sovereign borrower’s debt by a credit rating agency. Opposite of upgrade.|
|Equity||Equity is the holding or stake that shareholders have in a company. Equity capital is raised by the issue of new shares or by retaining profit.|
|Gearing||With regard to corporate analysis, gearing (or leverage) refers to the extent to which a company is funded by debt and can be calculated by dividing its debt by shareholders’ funds or by EBITDA.|
|Long-Term Rating||A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|Margin||A term whose meaning depends on the context. In the widest sense, it means the difference between two values.|
|Portfolio||A collection of investments held by an individual investor or financial institution. They may include stocks, bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value.|
|Risk||The possibility that an investment or venture will make a loss or not make the returns expected. There are many different types of risk including basis risk, country risk, credit risk, currency risk, economic risk, inflation risk, liquidity risk, market or systemic risk, political risk, settlement risk and translation risk.|
|Shareholder||An individual, entity or financial institution that holds shares or stock in an organisation or company.|
|Short-Term Rating||A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Oryx Properties Limited participated in the rating process, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit ratings have been disclosed to Oryx Properties Limited.
The information received from Oryx Properties Limited and other reliable third parties to accord the credit ratings included;
- Audited financial results of Company per 30 June 2018, plus four years comparative audited accounts;
- Unaudited interim results of Company per 30 December 2018;
- Full details of the property portfolio;
- Full details of funding facilities;
- Rights issue circular.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
GCR affirms Oryx Properties Limited rating of BBB+(NA); with a Rating Watch.